Owner-occupancy slides to the lowest level in almost a decade

Owner-occupancy in the UK slipped to the lowest level in nearly a decade, a new survey by Halifax showed yesterday, reflecting the squeeze on affordability caused by the rapid growth in house prices and higher interest rates.

Young buyers were particularly affected as they have struggled to get on to the property ladder amid double-digit rises in house prices in the past few years. Those seeking to purchase properties in the south of England, an area that has been at the forefront of the UK's housing boom, also faced difficulties.

The survey, based on government data, showed the number of owner-occupiers in England fell by a record 83,001 to 14.54 million last year. The second successive annual decline took the home ownership rate from 70.3% in 2006 to 69.8% - the weakest figure since 1998.

Martin Ellis, chief economist at Halifax, Britain's biggest mortgage lender, said: "The fall in the total number of owner-occupied households in England in 2007 largely reflects the increasing affordability difficulties faced by many potential purchasers as a result of the rapid rise in house prices in recent years. The figures for owner-occupancy clearly demonstrate that these affordability issues are most pronounced amongst younger people and in southern parts of England."

Buyers under the age of 44 saw a steep fall of 235,000 between 2005 and 2006, Halifax said, mainly driven by large falls for those under 34. London recorded the only decline in owner-occupation between 2001 and 2006, with a 6.3% drop. The north-west saw the largest rise.

The divide between house prices in the north and south was highlighted by a 345,000 increase in the north over the same five years, compared with a 92,000 fall in the south. Castle Point in Essex has the highest owner-occupation rate in England, at 88.5% of households.

The struggle to get on to the property ladder was reflected by a surge in rentals. The number of households living in privately rented housing rose by 107,000 last year to just under 2.6m, continuing the upward trend of the previous few years. The proportion of households renting has risen 12.5% since 2002.

Halifax said only the large eurozone countries such as France and Germany had lower owner-occupation rates than the UK. Spain and Hungary had some of the highest, with rates of more than 80%.